ATF price under support scheme fixed at 10% over current levels (PRICE FOR DELHI FROZEN AT RS 115 PER LITRE, MUMBAI AT RS 114.5), Pg15

Key Highlights:

• The Union Cabinet recently approved a Rs 10,000 crore price stabilisation fund scheme for Aviation Turbine Fuel (ATF).
• Under the scheme, public sector Oil Marketing Companies (OMCs) will sell jet fuel to participating Indian airlines at a fixed price for up to three years.
• The fixed price for ATF in Delhi is set at Rs 115 per litre, and in Mumbai at Rs 114.50 per litre.
• This mechanism aims to protect airlines and OMCs from extreme price volatility, especially due to the West Asia crisis.
• The scheme is expected to help rein in runaway airfares and ease financial strain on both airlines and OMCs.

Detailed Insights:

• The scheme allows OMCs to sell ATF at a predetermined price, irrespective of international market fluctuations.
• OMCs will be compensated from the price stabilisation fund when they incur losses on ATF sales.
• Conversely, gains from lower international prices will be used to offset the financial support provided by the fund.
• ATF prices vary across airports due to differing state levies, with Chennai having a fixed price of approximately Rs 139 per litre.
• The initiative is voluntary for Indian airlines, requiring them to procure ATF exclusively from OMCs for the scheme's duration.
• ATF typically accounts for 40% of Indian airlines' operational costs, which had surged to 55-60% due to price hikes.
• The West Asia crisis significantly pushed international jet fuel prices from Rs 60.50 per litre in March to Rs 142 per litre in May.
• The scheme aims to mitigate the financial impact on OMCs, which have been selling ATF and other fuels at a loss for domestic flights.

Key Concepts Involved:

• Aviation Turbine Fuel (ATF): A specialized type of jet fuel used to power aircraft, a significant operational expense for airlines.
• Price Stabilisation Fund: A financial mechanism designed to absorb price fluctuations, ensuring a consistent price for a commodity.
• Oil Marketing Companies (OMCs): Public sector enterprises responsible for the refining, distribution, and marketing of petroleum products.